BILL ANALYSIS �
AB 559
Page 1
Date of Hearing: April 12, 2011
ASSEMBLY COMMITTEE ON JUDICIARY
Mike Feuer, Chair
AB 559 (Swanson) - As Amended: April 4, 2011
SUBJECT : DISCRIMINATION: ATTORNEY'S FEES FOR LOW-INCOME WORKERS
AND VICTIMS OF HOUSING DISCRIMINATION
KEY ISSUE : SHOULD LOW-INCOME VICTIMS OF UNLAWFUL DISCRIMINATION
BE ENTITLED TO RECOVER THEIR ATTORNEY'S FEES UNDER THE SAME
RULES AS MORE HIGHLY-PAID VICTIMS OF DISCRIMINATION, DESPITE
RECOVERING LOWER MONETARY DAMAGES THAN THE UNLIMITED CASE
THRESHOLD?
FISCAL EFFECT : As currently in print this bill is keyed
non-fiscal.
SYNOPSIS
A recent California Supreme Court ruling upheld the denial of
attorney's fees to a victim of discrimination who prevailed in
the case but recovered less than the $25,000 jurisdictional
limit for unlimited cases in state court. Normally plaintiffs
are presumptively entitled to attorney's fees in such cases to
ensure that victims are not deterred from enforcing these
important civil rights. However, a separate law rule allows
judges to deny costs and attorney's fees entirely when a
plaintiff files the case under the unlimited civil rules but
fails to recover the jurisdictional minimum. When these two
laws intersect, the Court held, the rule allowing judges to deny
fees for mis-denominated cases trumps the rule that would
otherwise make fees automatic.
Advocates for lower-income victims of discrimination believe the
court's decision will make it more difficult for the working
poor to enforce these fundamental civil rights. They argue that
unlimited civil case procedures are the only effective mechanism
for prosecuting discrimination disputes, and that lawyers should
not be penalized for not accurately predicting that the ultimate
outcome of the case would be above the $25,000 limit,
particularly because some aspects of damages recovery are
difficult to quantify. They also contend that the rule
inappropriately refocuses these cases on the pursuit of higher
money damages, rather than non-monetary relief, creating fewer
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settlements, greater delay, and higher costs. The bill is
opposed by the California Chamber of Commerce and the Civil
Justice Association of California, which argue that an award of
attorney's fees to successful discrimination plaintiffs should
not be a routine event, and that it is appropriate for judges to
refuse to award attorney's fees in cases of nominal value.
A substantially identical measure by the author passed this
Committee last year but was vetoed by Governor Schwarzenegger.
SUMMARY : Revises attorney's fees awards in smaller
discrimination cases. Specifically, this bill exempts cases
brought under the Fair Employment and Housing Act (FEHA) from
the rule giving discretion to judges to deny fees in a case,
other than a limited civil case, if the prevailing party
recovers a judgment that could have been rendered in a limited
civil case.
EXISTING LAW provides that a prevailing party is entitled as a
matter of right to recover costs in any action or proceeding,
and specifies those items allowable as costs, but provides that
costs, or any portion of claimed costs, shall be as determined
by the court, in its discretion, in a case, other than a limited
civil case, if the prevailing party recovers a judgment that
could have been rendered in a limited civil case. (Code of
Civil Procedure section 1033.)
COMMENTS : The author states that this bill will help ensure
that low-income victims of unlawful discrimination have fair and
equitable access to the civil justice system for claims brought
under the Fair Employment and Housing Act (FEHA) by removing a
significant barrier to securing private counsel.
The sponsor, California Employment Lawyers Association, argues
that this bill will ensure that plaintiffs are not punished for
being unable to predict damage awards, and are allowed more
extensive discovery procedures to address the complex nature of
claims brought under the FEHA. Supporters note that this
proposal would still leave the trial court with broad authority
under Government Code Section 12965 to determine the amount of
reasonable attorney's fees, and the court may, if appropriate,
reduce a fee award if a plaintiff obtains only limited success,
so long as the claims on which the plaintiff prevails are
distinct from and unrelated to the unsuccessful claims. (Harman
v. City and County of San Francisco (2006) 136 Cal. App.4th
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1279, 1307, 39 Cal.Rptr.3d 589; Greene v. Dillingham
Construction N.A., Inc., supra, 101 Cal.App.4th at p. 423, 124
Cal.Rptr.2d 250.)
Prevailing Plaintiffs In Discrimination Cases Are Normally
Entitled To Recover Attorney's Fees. In any action brought
under the California Fair Employment and Housing Act (FEHA)
(Gov. Code, � 12900 et seq.), Government Code section 12965(b)
grants the trial court discretion to award attorney's fees to a
prevailing party. This statute has been interpreted to mean
that in a FEHA action a trial court should ordinarily award
attorney's fees to a prevailing plaintiff unless special
circumstances would render a fee award unjust. (Young v. Exxon
Mobil Corp. (2008) 168 Cal.App.4th 1467, 1474; Steele v. Jensen
Instrument Co. (1997) 59 Cal.App.4th 326, 331.)
Recovery of Attorney's Fees For Lower-Wage Victims Is At Risk
Under A Recent Court Ruling. Under existing law, a prevailing
party is generally entitled as a matter of right to recover
costs in any action or proceeding. (Code Civ. Proc., � 1032,
subd. (b).) The litigation costs that the prevailing party may
recover include attorney's fees when recovery of such fees is
authorized by statute. (Id., � 1033.5, subd. (a)(10)(B).) But
when "the prevailing party recovers a judgment that could have
been rendered in a limited civil case," and the action was not
brought as a limited civil case, Code of Civil Procedure section
1033(a) states that "costs or any portion of claimed costs shall
be as determined by the court in its discretion . . . ." A
limited civil case is one in which the plaintiff believes the
amount in controversy does not exceed twenty-five thousand
dollars ($25,000) or one defined by statute as a limited civil
case (Code of Civil Procedure �86).
On January 14, 2010, the California Supreme Court held in Chavez
v. City of Los Angeles (2010) 47 Cal.4th 970, that a trial court
has discretion in a FEHA case to deny a successful plaintiff his
attorney's fees when the plaintiff chooses to proceed in an
unlimited civil jurisdiction, but recovers less than the $25,000
jurisdictional minimum.
This decision reversed the Court of Appeal's ruling, which
reasoned that the rationale for denying attorney's fees under
section 1033(a) of the California Code of Civil Procedure, which
was designed to encourage pursuit of minor grievances in courts
of limited jurisdiction, is inapposite to statutory
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discrimination or civil rights actions because "even a modest
financial recovery can serve to vindicate a substantial legal
right." The Court of Appeal also opined that denying attorney's
fees under section 1033(a) would discourage attorneys from
taking meritorious cases.
The decision unfairly penalizes lower-income victims and deters
enforcement actions, supporters state, because damages amounts
in FEHA claims, which often involve non-pecuniary damages, are
difficult to quantify and hard to predict. They contend that
the Legislature must step in to help ensure that plaintiffs'
attorneys are not discouraged from taking FEHA cases because
these cases are integral to protect and vindicate important
civil rights.
Is The Interest In Protecting Lower-Income Victims of Illegal
Discrimination Sufficiently Important To Prevent Courts From
Denying Attorney's Fees When Illegal Discrimination Has Been
Proved? As the California Supreme Court noted in its decision,
attorney's fee awards in FEHA actions make it easier for
plaintiffs of limited means to pursue meritorious claims
(Cummings v. Benco Building Services (1992) 11 Cal.App.4th 1383,
1387); are intended to provide fair compensation to the
attorneys involved in the litigation at hand; and encourage
litigation of claims that are of public interest (Flannery v.
Prentice (2001) 26 Cal.4th 572, 584).
Supporters of this measure contend that that limited
jurisdiction case procedure makes it generally inappropriate for
FEHA discrimination cases. Most importantly, supporters argue,
limited jurisdiction cases are permitted very limited discovery;
in particular, only one deposition is allowed per party. Civil
rights and employment lawyers on both sides will acknowledge
that virtually no employment discrimination case can be proved
with these restrictions. Discrimination generally requires
proof of intent - that is, state of mind - which typically
depends on showing a larger pattern of treatment. Amassing that
evidence requires significant discovery by the plaintiff.
Unlike a normal breach of contract or tort action, such as an
auto accident, for example, all of the relevant evidence
regarding motive is in the exclusive possession of the
defendanat. Therefore, plaintiffs must engage in substantial
discovery to prove their cases.
If Lower-Income Victims Are Deterred From Bringing Private
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Enforcement Actions, They May Be Effectively Precluded From
Seeking Relief Because Budget Limitations Prevent The Department
Of Fair Employment And Housing From Adequately Serving Those Who
Cannot Obtain An Employment Lawyer. The need for plaintiffs of
limited means to access private counsel to pursue their FEHA
claims was highlighted in a recent UCLA-RAND study on the FEHA
and its enforcement procedures, supporters note. As this
Committee heard in its recent oversight hearing regarding the
Department of Fair Employment and Housing (DFEH), this study
found that lower-wage workers are much less able to secure
private counsel because the amount of damages they are allowed
to recover under the FEHA compared to the amount of legal work
needed to prosecute the case and the risks involved makes it
economically difficult for attorneys, most of whom are small
business owners operating as sole practitioners, to take on this
representation.
This is unfortunate, because the UCLA-RAND study found,
employees who are represented by lawyers prevail far more
frequently and obtain much better relief than those who must
rely on the DFEH. According to this study, employees who take
their case to trial win about half the time with jury awards
averaging $205,000. Those who stay in the state's
administrative system recover anything at all in 1 case out of
7, and even then receive an average of only $3,000.
The study found:
At present, we have two anti discrimination systems -
separate and unequal. Those with lawyers operating on
contingency fees have access to a civil justice system.
Others depend on the alternative provided by the DFEH and
the FEHC. Access to those two systems appears to vary
systematically by race, by occupation, and by sex. The
barrier to private counsel has been raised even higher very
recently. The California Supreme Court held in Chavez v.
City of Los Angeles (2010 WL 114941, January 14, 2010) that
in FEHA cases that might have been brought in a limited
jurisdiction Superior Court but were litigated to a verdict
of less than the $25,000 in a general jurisdiction Superior
Court, the court may deny attorneys' fees to the prevailing
plaintiff. Thus any attorney who considers accepting a
case that may result in a verdict under the jurisdictional
amount risks being paid nothing at all, even if he or she
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prevails at trial, based on his or her inability to predict
a jury verdict. Although most plaintiff s' lawyers were
already reluctant to accept smaller cases, their
disincentive to do so is now increased.
(G. Blasi & J. Doherty, California Employment and Discrimination
Law and Its Enforcement: The Fair Employment and Housing Act at
50, p. 65 (2010).)
The Department has made significant efforts to revamp its
procedures subsequent to this study, and has reportedly made
good progress toward addressing many of these issues. However,
most observers agree that the Department cannot realistically be
expected to serve a substantial portion of the need in light of
long-term budget constraints that have little likelihood of
improving any time soon.
Preventing Lower-Income Victims From Recovering Attorney's Fees
Unless They Win Larger Damage Awards May Be More Costly To
Defendants And Delay Resolution of Cases By Inappropriately
Encouraging Plaintiffs To Fight For Higher Damages. Although
many victims of discrimination will be deterred from enforcing
their rights or unable to obtain counsel, supporters argue, some
doubtlessly may persevere and file suit. What is the likely
effect of the Chavez rule on those cases? Supporters, such as
the Western Center on Law and Poverty and the CRLA Foundation,
contend that the practical result is that plaintiffs will focus
disproportionately on securing higher damages rather than
obtaining equitable relief. Thus, supporters argue, public
interest law suits that might otherwise be brought primarily to
obtain non-monetary injunctive or declaratory relief regarding
the principle at stake will be transformed into a fight to
ensure that the plaintiff obtains substantial damages in order
to prevent the loss of attorney's fees - resulting in fewer
settlements, greater delay, more trials, and greater potential
costs to defendants, both from protracted litigation and from
higher damage awards, and more greater congestion of
already-strained courts.
This Bill Would Appear To Address Concerns By Non-Profit Public
Interest Law Organizations. The Asian Pacific American Legal
Center, Bet Tzedek Legal Services, The Impact Fund, Public
Counsel, and The Western Center On Law And Poverty filed an
amicus brief on the side of the plaintiff in the Chavez case,
arguing that the case presented an issue of critical importance
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to California's working poor. According to their brief, these
organizations represent low-wage workers "who, when they are the
victims of illegal discrimination or retaliation in the
workplace, often cannot show calculable economic damages in
amounts that would automatically meet the requirement for filing
suit in a court of unlimited jurisdiction. This is, in part,
because these workers earn extremely low wages. Also, in order
to survive, these workers must immediately mitigate any damages
they suffer from termination or other adverse employment actions
by seeking new employment, as the loss of wages for even one day
or one week can itself render a low-wage employee unable to
feed, clothe, and house herself and her family. Finally,
low-wage workers do not have the luxury of seeking professional
treatment for the emotional distress that often accompanies
discriminatory and retaliatory employment practices."
These organizations noted that FEHA advances the constitutional
and legislative mandate to eradicate discrimination in the
workplace. "Given limited governmental resources available to
combat discrimination, FEHA's effectiveness depends on the
initiation of private lawsuits to combat discrimination. A
private lawsuit remedy, however, is illusory if a victim of
discrimination is unable to afford an attorney to prosecute his
or her case. FEHA solves that problem by providing attorney
fees to the prevailing party. �Giving] a court discretion to
deny 'costs' to a prevailing party if the damage award is an
amount that could have been obtained in a court of limited
jurisdiction, overrides FEHA's attorney fee standard and permits
a trial court discretion to deny fees simply because the damage
award is low." According to these amici, denying attorney's
fees in these cases would "disproportionately affect those the
FEHA's attorney fees provision was designed to protect: the
indigent victims of discrimination and retaliation, who are
wholly dependent on attorney fees to entice competent counsel to
take their cases. Without the same prospect for obtaining fees
as any other attorney prevailing in a FEHA matter, an attorney
presented with a clear case of discrimination against a
low-income employee would face an untenable choice: file the
claim in a court of limited jurisdiction, thereby guaranteeing
attorney fees but limiting the client's potential recovery of
noneconomic and punitive damages; or file the claim in superior
court and risk obtaining no fees if the client's award is
limited to low economic damages. An attorney faced with such a
dilemma may simply decline to take the case."
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ARGUMENTS IN OPPOSITION: The California Chamber of Commerce
argues that the bill is unnecessary, would undermine judicial
discretion, eliminate the incentive to use limited civil
proceedings, and force tax payers to foot the bill for
exorbitant legal fees when public entities are involved. The
Chamber "opposes legislative attempts to carve out an entire
category of claims from any statute, particularly where there is
no showing that such a bold step is necessary to protect the
rights of individuals. Doing so creates uncertainty for parties
who rely on the laws being applied equally and fairly to all
cases. ? AB 559 would expose employers to unanticipated costs
after the fact, merely because a plaintiff happens to allege a
FEHA claim."
The Civil Justice Association of California (CJAC) opposes the
bill, arguing that it "will undo a judicial deterrent to filing
frivolous lawsuits."
CJAC "believes it is appropriate for judges to use their
discretion to refuse to award attorney's fees in case of nominal
value and therefore opposes the bill. Allowing the award of
attorney's fees to successful plaintiffs should not be a routine
event. While our Legislature and our courts have allowed the
award of attorney's fees, the rationale behind such awards is to
compensate the attorneys for involvement in litigation that
somehow benefits the public. Such awards are discretionary and
should remain so."
CJAC concludes, "If we allowed all cases involving $5,000 in
controversy to be filed and litigated as unlimited civil cases,
our courts would be even more clogged and backlogged than they
are."
REGISTERED SUPPORT / OPPOSITION :
Support
California Employment Lawyers Association (sponsor)
California Labor Federation
California Rural Legal Assistance Foundation
California Conference Board of the Amalgamated Transit Union
California Conference of Machinists
California Official Court Reporters Association
California Teamsters Public Affairs Council
Church State Council
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Consumer Attorneys of California
Disability Rights California
Employment Law Center, Legal Aid Society of San Francisco
Engineers and Scientists of California
Equal Rights Advocates
International Longshoremen and Warehouse Union
Labor Project for Working Families
Law Office of Mary-Alice Coleman
Law Offices of Victor L. George
Professional and Technical Engineers, Local 21
SCOPE, Laborers International of North America
UNITE HERE!
United Food and Commercial Workers - Western States Conference
Utility Workers Union of America, Local 132
Western Center on Law and Poverty
Women's Employment Rights Clinic of Golden Gate U. School of Law
Opposition
California Chamber of Commerce
Civil Justice Association of California
Analysis Prepared by : Kevin G. Baker / JUD. / (916) 319-2334